Production Strategy: Don’t Overdrive Your Headlights
I’ve often seen unreasonable demands and expectations get in the way of production efficiency and customer service. Here is an example.
During an advanced planning and scheduling implementation at a large plant in Germany, the site was complaining that their new software didn’t work and could not create a schedule. We started looking at their operating strategy and the business rules for scheduling:
- Customer service should be at least 98%, no backorders were allowed.
- Customer order lead time was 3 days.
- There was to be little or no finished product inventory.
- There was to be no raw material or component inventory, shipments of components were to arrive just in time for production.
- The product production schedule was to be frozen for three weeks, because printed packaging materials were specific to the end SKU and had a three-week lead time.
It’s easy to see this “strategy” had no basis in reality – it was based on unreasonable rules and management demands that could not possibly be satisfied.
What did the planners really do? When we interviewed them and talked about what they did, we found they broke the unreasonable rules all the time. Most often they broke into the fixed production schedule and changed it to adjust for customer orders and component deliveries. But the software must follow the rules and can’t do this; therefore, it was impossible to create a schedule in the scheduling system.
The reality was that customer service was not meeting targets, finished product and component inventories were higher than expected, and the plant was out of capacity because of too many schedule changes and setups. In other words, they were not getting what they wanted and were meeting none of the strategy’s objectives.
This is something I’ve seen frequently, management asks for the impossible and the planners try their best, but it’s like overdriving your headlights in a car. You can get away with it for a while, but sooner or later the unseen or unexpected will happen, and the performance will be worse than if the business had used reasonable rules to start with.
HOW DID WE FIX THIS? We recognized three things:
- The rules didn’t add up and many were not real constraints.
- The planners were breaking the business rules all the time.
- Inventories were too low to support the business strategy.
Once the problem was understood, we developed a strategy based on the three real business constraints of customer service, customer order lead time, and packaging delivery:
- We kept finished product inventories low.
- We reduced the length of the frozen schedule to match the customer order lead time of three days, providing a short period of production stability, with a high probability of remaining fixed even with low finished product inventories.
- We created a buffer inventory of the long lead time packaging materials to allow flexibility beyond the three-day frozen schedule.
- The remaining components could be delivered within three days and were synchronized to the frozen schedule.
With the change in strategy, the new scheduling system delivered reliable schedules that maximize production efficiency.
THE NET RESULT: inventories, customer service, and throughput met objectives.
Ready to balance your production schedule to increase throughput? Phenix Planning and Scheduling starts by working with you to develop a production strategy that balances customer service, inventory, and throughput to meet your business objectives. It typically results in an efficiency increase of 5-30% without increasing inventory levels. Schedule a call here:
Subscribe to Our Newsletter!
Mac Jacob, Head of Product, CPIM, SCOR-P, was a key contributor to building Procter & Gamble’s supply chain, ranked as one of the four best in the world by the Gartner Group. He started in project management, production planning, warehousing, and shipping in a small manufacturing plant, and then became the planning manager for Luvs Diapers for North America. He realized that it was the supply chain systems that were holding back the business and led a project that eventually became P&G’s global SAP/MRP II implementation. At one time or another, he was the business leader, developed the work processes, and wrote the original training materials for most of P&G’s supply chain planning systems.
About Phenix Software
Changeovers and incorrect inventory levels waste significant time and money and affect customer service. Phenix planning and scheduling software uses Aligned Product Wheels to minimize waste and align production with the business’s customer service, cost and working capital goals.